Kraft Foods sells headquarters in effort to generate cash

Grocery business will lease back Northfield facilities for at least 10 years

January 19, 2013|By Emily Bryson York, Chicago Tribune reporter

Irene Rosenfeld, Kraft's CEO is speaks during a town hall meeting at Kraft Headquarters in Northfield on Friday February 5, 2010. (William DeShazer)

As part of a broad-based effort to return cash to shareholders, Kraft Foods Group said it has sold its Northfield headquarters and will lease it back for at least 10 years.

Kraft on Friday declined to say how much the buyer, real estate investment trust W.P. Carey, paid for the 679,000-square-foot property, situated on a 70-acre campus.

Kraft Foods was spun off from Mondelez International in October and is now a $19 billion North American grocery business. CEO Tony Vernon has said the company will shift its focus from revenue growth and profit margins to generating cash. He expects to recommend an annual dividend of $2 per share.

Although sale-leasebacks are a multibillion-dollar industry, Garry Cohen, senior managing director of leaseback capital at Mesirow Financial, called them an "underutilized tool."

Companies employ sale-leasebacks as a way to "unlock capital they had previously tied up in real estate," he said.

A Kraft Foods spokesman on Friday said the move allows the company to reinvest capital from the property into the company while maintaining its presence in Northfield.

In the memo to employees, Vernon said the sale reflects a desire to generate cash — not an interest in leaving the area.

"We're looking at numerous opportunities across our entire organization — from corporate to the functions to the business units — to improve our cash flow," Vernon said.

He added that nothing will change for employees as a result of the sale except the name on the deed. "In other words, it's business as usual," Vernon said.